Key issues: Strategy and growth

Overseeing strategy is a core board function. Company strategy lays the foundation for how the company allocates resources, structures operations, and measures success. When well executed, the right strategy creates significant shareholder value. In order for a director to effectively contribute to strategy discussions, he or she must dedicate sufficient effort, have the right information, and ask the right questions. Directors should also evaluate vulnerabilities to the company’s strategy as well as the level of team buy-in and be willing to challenge the assumptions underlying management’s thinking.

Concentrating on strategy

Nearly four in five directors wanted to spend more time on strategic planning in 20141. Directors realize the importance of strategy discussions, and virtually all (99%) discuss the continued viability of the company’s strategy at least once a year.2 More than one-third (36%) discuss strategy twice a year and 42% do so at every formal board meeting.

Getting the right information

Directors often want to understand how management devises the company’s strategy. Boards have high expectations about getting the right information from management so they can provide effective strategic planning oversight. It is clear that the overall majority of directors are satisfied with the information received. Nearly three-quarters (71%) of directors are happy with information management provide about customer satisfaction. But 29% are either dissatisfied with or don’t receive any information about competitor initiatives and strategy. Eighty-four percent of CEOs and 73% of directors say customers and clients are the most influential in building strategy, followed by industry competitors, government regulations, and then capital providers.3

Strategy oversight

There are several leading practices that boards use to oversee their company’s strategy. We asked directors which ones have been adopted by their boards. Here are responses that should help directors evaluate the effectiveness of their own approach4:

88% integrate discussions of risk with strategy

78% establish minimum guidelines for return on investment from strategic transactions (This suggests that boards are very sensitive to the potential downfalls of a bad merger or acquisition.)

74% believe their company’s approach to IT contributes to and is aligned with setting strategy

70% use annual special meetings/retreats to discuss strategy (This suggests directors think strategy is important enough to change the venue. Dedicated time, often at a separate location, may enhance how effectively the board interacts and focuses on this important task.)

External threats

When it comes to external threats to the company’s growth prospects, CEOs and directors generally have the same concerns. However, one area where directors have expressed more concern is over-regulation. Eighty-five percent of directors are at least somewhat concerned with over-regulation, whereas only 77% of CEOs expressed the same level of concern. On the other hand, 93% of CEOs expressed much more concern with the government response to the fiscal deficit and debt burden, as compared to only 82% of directors.